Legal Briefing: First Amendment Won't Protect Ratings Agencies
Ratings Agencies' First Amendment Defense Rejected Again
Defending against lawsuits claiming that they issued bogus AAA ratings that resulted in junk bonds being sold as top investment-grade securities, the ratings agencies have asserted a First Amendment defense. Look, they say, our ratings are opinions about matters of public concern, like newspaper editorials, and thus protected speech. So far, they're not winning the argument.
District Judge Shira Scheindlin rejected it in a New York case, finding the plaintiffs had successfully alleged fraud, (the First Amendment doesn't protect fraudulent speech) and further, that the rated securities were not offered publicly, so the ratings weren't matters of public concern.
Now, a California judge has gone a little further, stating in nonbinding dicta that the ratings agencies aren't the equivalent of the financial press, presumably meaning that they don't deserve press-like protection. (The statement is dicta because the judge rejected the First Amendment defense on the same grounds that Judge Scheindlin did.)
Duane Reed's Ex-CEO Convicted of Fraud
Duane Reed's Ex-CEO Anthony Cuti has been convicted of fraud, reports Bloomberg. He and ex-CFO William Tenant fraudulently "increased" revenue and "decreased" expenses from 2000-2005. Sentencing will come this winter, which seems an awfully long time from now, especially since the men can remain free on bond until then. I doubt that many non-white-collar -- er, "common" -- criminals get that kind of break.
AG Cuomo Can Sue First American Over Inflated Appraisals
Among the key elements fueling the real estate bubble were inflated appraisals. If a home didn't appraise for enough, the high loan for the buyer couldn't be made. So appraisers faced tremendous pressure to support unjustifiable values. New York Attorney General Andrew Cuomo sued First American Corp. for allegedly inflating home values in response to demands from Washington Mutual, but the suit hasn't moved forward because First American argued Cuomo didn't have the legal right to bring that lawsuit. Well, Bloomberg reports that First American just lost that argument, so Cuomo will get to make his case.
FBI Takes Terror Tactics to Wall Street
Since the 9/11 attacks, considerable effort has been spent on creating new legal tools and tactics to go after terrorists. Now the FBI has decided to use terror tactics to target white-collar fraud, reports The Wall Street Journal. It'll be really interesting to see what happens as a result. It's not the first time that targeted enforcement laws and tactics jumped their original range: The Racketeer Influenced Corrupt Organizations Act, designed to break the mob, is still used against mobsters, but it's trotted out for many many other reasons far more often.
BP's History of Misdeeds
If you have any doubt that BP (BP) will be found criminally and civilly liable for the Deepwater Horizon oil spill in the Gulf of Mexico, check out this Pro Publica report on BP's history of abusing the environment.
And in the Business of Law...
• Is K&L Gates discriminating against mothers? Above the Law takes a look at the firm's New York office, and finds highly suggestive evidence that it is...
• Along those lines, Kathleen J. Wu, a female partner at Andrews Kurth told Texas Lawyer that female attorneys need to "get real" about work-life balance, noting it's not possible to have it all -- marriage, kids, career -- without real sacrifices. She points out that the two recent female Supreme Court nominees, Justice Sotomayor and nominee Elena Kagan, are single and childless. (Perhaps someone should tell Wu that Justice Ruth Bader Ginsburg is married with two children and Justice Sandra Day O'Connor was married and had three kids.)
What bugs me most about Wu's advice isn't its basic message that choices have consequences -- of course, being an attorney means you have less time with your spouse and kids than if you were a housewife, with all of the attendant consequences. No, what bothers me is the underlying message that the consequences of the choice to have a career are uniquely significant for women. Don't men make exactly the same sacrifices regarding time with their wives and children by being attorneys? Are the roles of husband and father really so insignificant compared to those of wife and mother?